In a major setback for the Directorate of Enforcement (ED), the Madras High Court has quashed the case registered against two big time sand mining contractors and their associates, holding that the agency has stepped outside its jurisdiction since mining does not come under the scheduled list of offences in the Prevention of Money Laundering Act (PMLA).

A Division Bench of Justices MS Ramesh and Sunder Mohan ruled that the ED has overstepped its remit in registering the case. The Judges also set aside the seizure and impoundment of documents and properties, including gold jewellery and cash in the two day raids carried out by the agency.

The Bench passed orders on the petitions filed by Ramachandran of Pudukottai, Rathinam of Dindigul and others challenging the ED registering the ECIR and the subsequent seizures and impoundment.

Launching an investigation into illegal sand mining in Tamil Nadu, the ED registered a case (ECIR) in September 2023. The ED had estimated that illegal sand mining in the state was to the tune of Rs 4,730 crore while the revenue for the exchequer was a mere Rs 36 crore.

As a follow up, on September 12, 2023 raids were carried out on the residences, business establishments of Ramachandran, Rathinam, their associates and that of retired PWD engineer Thilagam and Water Resources Department (WRD) Chief Engineer Muthaiah. All raids were carried out for two days on 34 places including the WRD office in Chennai.

The team of defence counsel argued that mining is not listed in the schedule under the PMLA and hence, the ECIR was registered without jurisdiction. They also submitted that this was against a Supreme Court verdict. Accepting this, the Bench quashed the case and ordered the release of the seized properties and documents.

In a related case, another Bench had earlier termed as ‘fishing expedition’ the ED’s summons to five district collectors to share details of the quantum of sand mining in their respective districts. The EDs methodology in arriving at the quantum of mining was also questioned. While the Bench had stayed the summons, a Supreme Court bench had directed the Collectors to comply with the summons. The matter is still pending adjudication.